$MRVL bulls turn quick profits

Marvell Technology spiked higher on positive merger developments today, yielding large gains on option positions opened just three sessions earlier.

On Tuesday, Investitute’s tracking systems detected the purchase of 4,200 August $20 calls in one print for $1.23 with shares at $19.92. This was clearly a new position, as open interest in the strike was only 806 contracts before the trade occurred..

Those calls sold for $2.31 today, nearly twice their purchase price. The stock rose 9.5% in the same time frame, showing how quickly options can outpace gains in their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

MRVL jumped 8.2% to $21.77 today. The semiconductor and storage company rallied this morning after receiving approval from Chinese regulatory authorities for its proposed merger with Cavium.